‘What Renters Need to Know’ is a new WilliamPaid series that will address some of the legal aspects that govern leases and landlord-tenant relationships. Our inaugural ‘What Renters Need to Know’ subject is the ins-and-outs of security deposits.

You know it well: You write a check to your new landlord for one or two months’ rent as a security deposit and then don’t think about it again until your lease is up. At that point, you start worrying about whether you will get it back. Knowing the legal requirements for how security deposits must be handled may help you ensure that you get your money back.

By way of background, most municipalities have their own landlord-tenant ordinances that govern the basics with respect to rental situations. So, if you are having an issue, your best bet is to conduct an online search with the name of your city and the words “landlord tenant ordinance.” (Many major cities are covered at this site). From there, read what your rights and remedies are. (Note: be aware that some ordinances allow landlords to essentially opt-out by having rental agreements expressly override the statute - take a look at your lease.)

While each city’s provisions will vary, the following are general concepts that many municipalities have adopted with respect to security deposits.

How held? Generally, landlords must hold security deposits in a separate, non-commingled, interest-bearing account at a federally-insured institution.

Who does it belong to? The security deposit continues to belong to the tenant until and unless there is a default under the lease (or ordinance) that may be remedied with use of the security deposit. Notice and a grace period may be required before the security deposit can be confiscated.

Is the tenant entitled to interest? Generally, yes. For example, the City of Chicago code provides that, if the deposit is held for more than six months, interest shall accrue from the beginning of the rental term. The rate of interest is usually set by ordinance (can be fixed or floating).

When is interest paid? Some ordinances provide that interest is to be paid at the end of the term. Others, like the City of Chicago, provide that the interest must be paid in cash or credited to the rent every twelve months.

When is security deposit to be returned? Generally, most ordinances provide for a return of the security deposit between 30 and 60 days following termination of the rental agreement.

What can be deducted from the security deposit? Again, this will vary by city, but, generally, ordinances will allow the landlord to retain amounts for unpaid rent and “reasonable” amounts to repair damage (excluding wear and tear). If the landlord is going to deduct any monies for damages, most cities require that the landlord provide an itemized statement of the damages as well as copies of receipts for the cost of repair. The best way to ensure that there are no surprises when you expect your return security deposit is to complete a walk-through and checklist of the premises with your landlord at the beginning and end of your rental period. Put the results in writing.

What about new landlords? If your landlord sold the property, you will generally be entitled to notice that your security deposit has been transferred. If notice isn’t received, the original landlord could still be on the hook for your security deposit.

Letting your landlord know that you know your rights can help you get your money back. That’s what you need to know. Let us know if you have any questions - we’ll see if we can help.

Note: This website is intended to supply general information only and is not legal advice. Although the information is generally accurate, it cannot be guaranteed and may vary by jurisdiction and by the facts of individual circumstances. Laws can change quickly, so review your applicable law or seek the advice of counsel. You should not rely on the information provided herein.